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Victor P. Goldberg

Most Contracts casebooks feature either Baird v. Gimbel or Drennan v. Star Paving to illustrate the limits on revocability of an offer. In this chapter an analysis of the case law yields three major conclusions. First, as is generally known, in the contractor–subcontractor cases, Drennan has prevailed. However, both it and its spawn, Restatement 2d 87(2), have had almost no impact outside that narrow area. Moreover, almost all the cases involve public construction projects—private projects account for only about 10 percent of the cases. This suggests that private parties have managed to resolve the problem contractually. Public contract law is encrusted with regulations, which courts and contracts scholars have ignored. The result is a peculiar phenomenon—a supposedly general contract doctrine that applies only in a specific context, but which ignores the features of that context.
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Victor P. Goldberg

This chapter defends the “tacit assumption” test for recovery of consequential damages. Critics of the notion ask: “would reasonable people have contemplated the possibility?” The test asks, even if they would have contemplated the possibility, how would reasonable people allocate the risks? The risks are, to some degree, endogenous—both parties contribute to the harm. The relevant question should be to what extent can one party run its business in reliance on the successful performance of the counterparty’s obligation? The widespread use of disclaimers suggests that the risk of consequential damages should typically be assigned to the non-breaching party. The chapter also considers some significant exceptions to that rule.
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Victor P. Goldberg

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Victor P. Goldberg

After the publisher reneged on a promise to publish, the author sued and won. However, he was only awarded nominal damages, six cents. The case stands for the proposition that speculative damages would not be awarded. This chapter examines the author’s damage theories. Analysis of the record reveals that his most plausible claim, for lost royalties, was never submitted to any court. The contract should have been interpreted as giving the publisher an option to publish with the price being the author’s advance. The breach would have been the publisher’s refusal to return the manuscript to the author.
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Victor P. Goldberg

Rethinking Contract Law and Contract Design presents a rich array of ideas that reassess the law and economics of contractual relations. Victor P. Goldberg uses a transactional framework to critically analyse and re-evaluate contract doctrine and specific legal cases. This important work examines particular contractual precepts whilst conducting a detailed exercise in legal archaeology, challenging readers to reconsider significant legal decisions by forensic exploration of records, briefs, and other materials, including the staple cases of textbooks and casebooks.
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Victor P. Goldberg

Contract performance takes place over time and the nature of the parties’ future obligations can be deferred to take account of changing circumstances. If one party has the discretion to terminate, the other party can confront the decision maker with a price reflecting its reliance. The decision to breach can be viewed as the exercise of an option to abandon with the remedy being the implicit price of that option. By looking at the pricing of explicit termination options, we can get some insight into how the implicit option could be priced. The evidence from the explicit pricing of the termination option indicates that the price need bear no relation to the amount of money that would fully compensate the counterparty if the option were exercised.
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Victor P. Goldberg

Under the common law, a contracting party could only demand assurance of performance if the other party was insolvent. If a party had reasonable grounds for insecurity, the UCC §2-609 allowed it to demand adequate assurance even if the counterparty were solvent. The Restatement (Second) adopted the same rule for non-goods. In NorCon v. Niagara Mohawk the New York court extended the adequate assurance doctrine for some non-goods contracts. Although the decision seems to imply that there is some relation between the NorCon facts and its conclusion as to the law, there is none.
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Victor P. Goldberg

After WorldCom went bankrupt it rejected Michael Jordan’s endorsement contract. The bankruptcy court rejected Jordan’s claim that he was a “lost volume seller” and also held that he had failed to mitigate damages. This chapter argues that the lost volume claim was properly rejected but that the court misapplied the mitigation doctrine.
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Victor P. Goldberg

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Victor P. Goldberg

After the publisher reneged on a promise to publish, the author sued and won. The court held that damages were too speculative and instead allowed the author to recover his reliance damages. He claimed that he should be compensated for the time he spent on the manuscript multiplied by his hourly rate as a lawyer. The jury rendered a compromise verdict which accepted the reliance theory and the court approved. Since the author did have the right to publish elsewhere and, in fact, did so, the damages should have been the costs of delayed publication. Had the contract made explicit that the publisher maintained an option to publish, there would have been no breach. Since the contract was on the publisher’s form, it should have been able to eliminate any ambiguity.